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Siemens offloads Wireless Modules business

03/05/2008

Oyster Bay, N.Y. - March 5 - On March 4,  Siemens AG announced that its Wireless Modules business unit, a part of its Automation & Drives division, will be acquired by an investment consortium called the "Joint Operations for Mobile Applications" (JOMA) and consisting of Deutsche Telecom's T-Mobile Venture Fund, as well as two private investment firms.

According to ABI Research senior analyst Sam Lucero, "This is a timely deal that happened for several reasons. First, the M2M market is much broader in scope than is the focus of Siemens' industrial controls business, of which Wireless Modules was formerly a part. Second, T-Mobile is dramatically increasing its efforts to develop its M2M business, and this investment is a further sign of this strategy. Finally, the wireless module market itself, while growing rapidly, is also an exceptionally challenging environment in which to operate, and given the difference in focus between Siemens' industrial sensor control business and its Wireless Modules business unit, it's not surprising that Siemens AG would choose to divest itself of the Wireless Modules business."

There are several implications arising from this buyout. First, in regard to Siemens AG, any positive impact on the Wireless Modules business is likely to be muted. The buyout separates the Wireless Modules business from the significant resources it could formerly derive from the parent company: supply-chain and logistic economies of scale and vast distribution reach.

On the other hand, as a stand-alone business it may be freer in its strategy to pursue a broader set of market applications, and the tie-up with T-Mobile certainly gives it a path to product/solution differentiation and avoiding the commoditization that appears to be creeping into the overall wireless modules segment. The potential pitfall of the T-Mobile tie-up is that it associates the former Siemens unit very closely with a traditional carrier; in contrast, Wavecom's looser deals with Jasper Wireless and Numerex provide inherent advantages over a Siemens/T-Mobile tie-up.

"Finally," Lucero concludes, "we believe the impact on competitors will be limited as well; the spin-off presents less of a direct challenge to competitors than an acquisition of a standalone wireless modules business by Siemens AG would have presented. The buyout will further raise the issue of wireless module commoditization, however, and ABI Research would not be surprised to see further M&A activity in this space in 2008."